Dec. 4, 2003 — With the rise of online auto buying making it far more difficult for consumers to “kick the tires” of vehicles prior to purchase, sales sites and third-party providers have rolled out an array of safeguards to assure would-be customers that they can bid or buy with confidence. But critics charge that the protections aren’t all they’re cracked up to be and give buyers a false sense of security that is being exploited by crooks and cons.
While the Internet has armed consumers with a wealth of information that they can put to good use in selecting the vehicle of their dreams, it also has provided scam artists and unscrupulous auto dealers with a new venue in which to practice the tricks of their trade.
As part of an effort to combat such chicanery, a number of services aimed at bolstering consumer confidence in the online auto sales arena have sprung up, including click-to-purchase vehicle history reports, warranties and fraud protection policies.
But some observers say that the products offer limited protection at best, and at worst leave consumers with the mistaken impression that they have taken the risk out of their transaction.
Attorneys handling the growing number of cases arising from online vehicle sales single out vehicle history reports such as those offered by industry leaders CARFAX and Experian Automotive, provider of the Autocheck product, for especially harsh criticism.
“A vehicle history report doesn’t protect buyers at all. In fact, it ends up hurting them because they think they’re being protected,” said Bernard Brown, a Kansas City, Mo., attorney who specializes in automobile fraud cases and works with numerous consumer groups on vehicle safety issues.
Representatives of the companies concede that their databases aren’t perfect but say the reports are a valuable tool for consumers in researching a vehicle’s past.
“Knowledge is power, whether that’s a car history report, a mechanical inspection or whatever,” said Andy Shehan, vice president of marketing at Experian Automotive. “… When purchasing a car, would you be better off with it than without it? My answer would be ‘with it.’”
Even their detractors concede that the reports are generally helpful in tracing the chain of ownership of a vehicle and determining whether a “salvage” brand — a marking that indicates a vehicle was declared a “total loss” by an insurer — has ever been placed on its title.
But they say the companies’ representation that the reports also show whether vehicles have sustained “major accident damage” is spurious.
Lawsuit over history reports
“My guess is that seven out of eight cars that have been in major wrecks will not show up,” said Brown.
That is the central issue in a lawsuit filed recently in Tennessee on behalf of a Memphis auto dealer alleging that CARFAX markets its vehicle histories “in a manner which is unfair, false, deceptive and materially misleading.”
Among other things, the lawsuit filed by Memphis attorneys David McLaughlin and Frank Watson III on Oct. 28 alleges that the Fairfax, Va.-based company does not have access to police accident reports in 23 states and that its vehicle histories “therefore are incomplete, inaccurate and/or unreliable.”
McLaughlin and Watson, who are seeking class action status for the lawsuit, charge that auto dealer Mid-South Motors purchased a 1995 BMW 525i from another wholesaler in 2002 after buying a CARFAX report that showed no “salvage” brands and no police accident or damage disclosure records.
A subsequent check of a database maintained by the National Insurance Crime Bureau (NICB), an industry anti-fraud group, by a person with access to the records revealed that the BMW had been declared a “total loss” three separate times after accidents in New York, Florida and Georgia that were reflected in police accident records, according to court documents.
Liz DeCastro, a spokeswoman for CARFAX, said she could not comment on specific allegations in the lawsuit, but added, “We’re not really sure where their claims are coming from.
“We provide more information to buyers than anyone can get anywhere else, including major accident data from all 50 states … and 4,500 other sources, in both the public and private sector,” she said.
Representatives of CARFAX and Experian Automotive both declined to state specifically where they get their data, citing competitive concerns.
No way to cross-reference
But after MSNBC.com contacted motor vehicle departments and public safety officials in Texas and California — two of the states identified as not providing records to CARFAX in the Tennessee lawsuit — and verified that no accident data linked to unique vehicle identification numbers (VINs) is currently provided to vendors, DeCastro acknowledged that the company would have no way to cross-reference accident reports without them.
“We do get a lot of information from Texas and California ... and both those states are working on systems issues to get us other information,” she said.
Critics of the vehicle history reports also charge that some auto dealers use them to sell previously damaged autos and trucks to unsuspecting buyers.
Dale Irvin, a Kansas City, Mo., attorney, said he worked with Brown on a case in which a local dealership used a clean CARFAX report to sell his clients a pickup truck that had suffered more than $8,000 in damage in a previous wreck.
“Although the dealer, according to our expert witness, would have spotted the evidence of the prior wreck and repairs, by having a clean CARFAX (report) the dealer felt free to misrepresent the vehicle,” he said.
One industry insider, who spoke with MSNBC.com on condition of anonymity, said that while dealers typically claim to have been fooled by a clean vehicle history report when buyers come back with evidence that it was involved in a serious accident, such explanations don’t wash.
“When they buy those cars at auction, they can see an overspray (indicating major body work) from a mile away,” the source said. “I don’t think any legitimate car dealer could stay in business if that was the extent of their knowledge.”
Carfax, Experian defend products
Both CARFAX and Experian Automotive defend their products as being the most comprehensive sources of accident and title information available to the public — since the NICB records are a closely held industry secret — while simultaneously stating that consumers should use everything at their command to ensure they’re getting what they think they’re getting.
“We promise to be a tool for consumers, but we say get an inspection, take a test drive,” said DeCastro.
While providers of vehicle history reports have their share of detractors, so too do policies offered by some online auto-selling sites that appear to offer some level of protection but often don’t hold up once it comes time to file a claim.
Several buyers interviewed by MSNBC.com complained that after being sold vehicles that were misrepresented by sellers using eBay Motors, they were excluded under the leading auto auction site’s “purchase assurance” policy because the misrepresentation didn’t amount to at least half of the vehicle’s value.
Others said that claims filed with eBay Motors lapsed after the scofflaw sellers dragged out the mediation process beyond the 30-day expiration period.
“It’s really set up so that there’s nothing you can do,” said Ron Wayden of Huntsville, Ala., whose travails were recounted in Part 1 of this series.
One auction industry insider, who spoke with MSNBC.com on condition of anonymity, said eBay Motors’ mediation process also is fundamentally flawed.
“EBay uses a company in Birmingham, Ala., Auction Services, to play the mediator role between buyer and seller,” the source said. ”(Unhappy buyers) get shoved into the arms of this little mediation company that tries to get the seller to cough it up but has no real power. There are hundreds of cases like this every day. … I’ve been there, and I’ve seen the stacks of complaints piled up on the desks.”
A phone call to Auction Services was not returned.
The source also charged that the “sight-unseen warranty” offered by eBay Motors is “toothless.”
“Go into the PDF file and look at the disclaimers,” the source said. “… The warranty excludes all pre-existing conditions. So if you buy a car and the transmission falls out of it, they’re not going to cover it.”
Simon Rothman, eBay Motors vice president and general manager, defended the limited warranty, which promises “sight-unseen coverage on vehicle failure for one month or 1,000 miles” on vehicles that are less than 10 years old and with fewer than 125,000 miles, as “a basic power train warranty, very standard.”
But he acknowledged that it excludes conditions that predated the sale.
“If there’s a pre-existing condition, buyer and seller need to do due diligence so they know. … It’s not a bumper-to-bumper warranty.”
Rothman declined to say how many claims — if any — eBay Motors had honored under the purchase assurance program or limited warranty.
Like the general eBay site, eBay Motors works with law enforcement when it receives credible reports of fraudulent activity, company representatives said.
But because so many online auto transactions cross state lines, consumers who are burned buying a car face a whole new set of frustrations if they try to go outside the closed reparations loop available to them on the auto-selling sites.
“The nature of consumer fraud on the Internet is that it crosses state lines, so state attorneys general need to get involved,” said Brown, the consumer fraud attorney. “Sadly, in the great majority of states there is a dearth of enforcement. … If you think you’re going to get law enforcement help, forget about it! It ain’t gonna happen.”
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